The Dow Jones Industrial Average (^DJI -0.11%) slipped about 177 points today, despite a better-than-expected earnings report from Salesforce (CRM -2.24%) that pushed the stock nearly 10% higher, which was by far the biggest move of any of the Dow's 30 stocks.
Contributing to the losses in the Dow were financials and consumer goods stocks, which struggled following a warning from JPMorgan Chase's esteemed CEO Jamie Dimon. The bank leader warned investors to prepare for what he described as an economic "hurricane."
Salesforce surprises
For the first quarter of fiscal 2023, which ended on April 30, Salesforce reported diluted earnings per share of $0.03 and adjusted earnings per share of $0.98. Total revenue came in at $7.41 billion. Both adjusted earnings and revenue beat analyst estimates during a quarter with difficult economic conditions, sending shares higher.
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"Our financial results once again demonstrate the strength and durability of our business model as we continue to see strong demand from customers across the entire Customer 360 portfolio," Salesforce's Co-CEO Bret Taylor said in a statement.
He added: "Salesforce has become even more strategic and relevant to our customers as we are providing them with the agility and resilience they need to drive growth and efficiency in these uncertain economic times."
Along with the strong financial results, Salesforce also raised guidance. The company now expects to generate revenue of at least $31.7 billion for the full 2023 fiscal year and adjusted earnings per share of roughly $4.75. For the current quarter, Salesforce expects adjusted earnings of at least $1.01 on revenue of at least $7.69 billion.
In a research note, Bank of America analyst Brad Sills called the results "solid" and that "renewed discipline" on core expenses should help Salesforce achieve "meaning margin expansion."
Dimon's warning
Although Salesforce is often seen as a precursor for tech earnings because of its reporting schedule, the positive results from the cloud software company were not enough to pull the Dow into the green. The stark warning from JPMorgan's top executive seemed to spook investors today.
Dimon said at a conference this morning that instead of "storm clouds" ahead for the U.S. economy, he now sees a "hurricane."
"You'd better brace yourself," he said. "JPMorgan is bracing ourselves and we're going to be very conservative with our balance sheet."
Dimon's fears stem from Russia's ongoing invasion of Ukraine, which he thinks will have an extraordinarily negative impact on commodities such as food and oil. Dimon said he is concerned that the price of oil could rise all the way to $150 or $175 per barrel, up from just below $115, as of this writing.
Dimon is also extremely worried about the Federal Reserve's unwinding of its nearly $9 trillion balance sheet in a process known as quantitative tightening, which will effectively drain liquidity from the economy. The Fed begins that process today and will eventually ramp up to running off $95 billion of bonds from its balance sheet every month by August.
The Fed has never embarked on a quantitative tightening effort of such epic proportions, so it could end up having consequences that no one is prepared for and create more market volatility down the line than currently anticipated.
